Fees

The real banking disruptors in 2018 won’t be new banks: Capitec

With three new banks expected to launch in South Africa in 2018, competition in South Africa’s banking space is set to kick up a gear, as the new entrants set their sights on disrupting the market.

South Africa will see three new banking options in 2018, when Discovery launches its banking offering, Post Bank launches its official service banking, and billionaire-backed Tyme digital comes onto the scene with a fully digital bank – a first for South Africa.

Excluding social security grants, only about 58% of the South African population are considered ‘banked’ (having a some type of bank account), leaving room in the market for new entrants to capture a share.

Discovery has made it clear that it will target clients in the markets where its insurance products play, while Tyme will likely play across the board, with points-of-presence at Pick n Pay stores giving access to most markets.

Post Bank will aim for the same market its current, limited services operate in, with the potential to capture the almost 20% market share occupied by the Sassa card holders, should its bid to take over the system succeed.

Not a threat

South Africa’s ‘youngest’ bank, and a market disruptor in its own right, Capitec, has weighed in on the new banks hitting SA in 2018, and what it means for the market.

Speaking to BusinessTech, Capitec said that it welcomed any new competition into the market, as it would be good for the industry and consumers at the end of the day – but ultimately, the group did not see Discovery, Tyme or Post Bank as a direct threat to its business.

“Building a bank requires immense dedication, effort and focus and does not happen overnight,” said Capitec head of communications, Charl Nel.

Capitec launched in South Africa in 2001 and initially targeted lower-income groups, and made waves by offering unsecured loans and banking services with fixed, low fees on its only account, the Global One.

Over the years, as consumers became more price sensitive and banking fees garnered more attention, Capitec’s simplified, fixed fee system became appealing to a wider market, and the bank grew to become the second largest retail banking in the country, by client numbers.

According to Capitec, even though it has been around for 16 years, it is still seen as a new entrant, and still has to work harder than the traditional ‘big four’ (Standard Bank, Absa, FNB and Nedbank) to attract customers.

Nel said the bank doesn’t get too drawn into directly competing and changing its business habits by what competitors do, rather choosing to focus on its own clients and their needs.

“One of the reasons for Capitec’s success is the fact that we developed our offering with the client in mind and not in response to our competitors. In fact, we deliberately approach banking from a retail perspective with our focus squarely on our clients’ needs,” Nel said.

“Although we keep a watchful eye on the market positioning of new entrants, we do not see them as a direct threat.”

Instead, Nel said, the threat of disruption and future competition was more likely to come from other sources – more specifically, fintech companies, which break the traditional banking mould.

“We anticipate future competition to come from fintech companies, which are not banks in the traditional sense,” he said. “Our approach to safeguarding our market share is to provide our clients with the best possible solutions – our value to them lies in the relationship of trust that we’ve built over the years, by making every decision in their best interest.”

“Disruption can come from any source, not necessarily banks and financial institutions, and we are constantly studying the market to prepare for any possible scenario,” he said.